If I tell you, then we will both know...

A long time ago a colleague told me about a reporter going through a customs inspection at an airport in a developing country. As the customs officer emptied his suitcase and all other bags on the table, checking every pocket and container he could find the reporter asked: "If you tell me what you are looking for I'll let you know if I have it in my bags and show you where it is." The customs officer stared directly into his eyes and with a serious expression said: "If I tell you then we will both know" and then returned to tearing apart the reporter's bags.

Sometimes standards appear to be just like the customs officer, they appear to be reasonable but no body really knows what is required until the auditor finds what she is looking for. 

This can drive clients crazy because they want to make sure they know what they have to do and they want it all done before the auditor gets on site.

A key component of knowing what you have to do is knowing what the terminology in the requirements really means.  

I know it sounds boring but a good glossary of terms with clear definitions can turn your requirements from vague to precise.  Every scheme should have its own glossary of terms and acronyms to help the user understand what you really mean, not just what they think you mean.

Here are my high point recommendations on how to write good definitions for your scheme:

• There should be only one authoritative list of definitions; this avoids the eventuality of having several definitions for the same term.
• A term should be defined when it has more than one common definition, one or more of which can cause an inaccurate reading of the requirements.
• A term should be defined when it is unique to your scheme.
• There should only be one definition for each term.
• When more than one term is used for the same definition (e.g. ‘producer country’ and ‘country of origin’) there should be only one definition for the main term and the second term should be included in the glossary with a reference to the main definition (e.g. “country of origin: see producer country”).
• Terms should be defined in clear simple language, using short sentences.
• Definitions should not include examples, illustrations, similes or metaphors.

Clear definitions can make audits go more smoothly, encourage your scheme's users to be in compliance sooner and can help make sure that everyone knows what the requirement really means.

Now we all know.

Building a new scheme is like a puzzle.

I have had the chance to work with a number of new schemes; these are efforts to develop a certification or labeling scheme from scratch. What normally happens is a group of people get together, usually they are issue experts in the area. They start the process of writing a standard.  

Sometimes this process can go on for years. The number of experts as well as interested and affected parties begins to grow and the standard begins to take shape. They put a huge amount of energy into writing a standard that contains everything.  Then they run a field trial and test the standard out and once that has been done they start to put it into operation.

That is when things can go 'pear shaped'. They have built the perfect standard that issue experts understand but once they step out of that world the rest of the industry sector, processors, customers, retailers and other users cannot figure out how to use the standard.

Eventually they call someone like me and they are told that the standard has too much in it and that it does not play well with the other certification, business processes and the management systems used by most companies. This is hard news to hear and it can sound like they just wasted a huge amount of energy, good will and lost an opportunity. It can be fixed; it is just a lot of work.

The way to avoid this situation is to see the process of developing a new scheme as a puzzle. Puzzles are built one piece at a time and until all the pieces fit together it is not finished.

The standard, as important as it is, is not the only piece.  The key elements include:

• The standard,
• The rules that accreditation bodies must follow,
• The rules that certification bodies must follow,
• The rules that govern who can be an auditor,
• The rules that govern claims, trademarks and logos,
• The procedures that the scheme owner will follow, and
• Sometimes, even more sets of rules.

But, it can still get more complex than this. Each of these elements can be made up of a number of other pieces - it's becoming a rather large puzzle.

Let's look back at the standard. The best way to begin is to understand a bit about how the industry in which you work functions and the way the auditing industry functions.  

Many of the most successful schemes are built on the foundation of other standards. If, for example, your scheme is designed to produce a certified product then you may find that building your scheme on ISO 17065 can be useful. It is understood well by the auditing industry and it includes many of the process and administrative requirements already assembled and your scheme can add the specifics of your scheme right on top of it. Also, it is not necessary for your standard to describe every step that an auditor must take, much of that is included in ISO 19011 and most auditors are trained in its application. There are a number of other building blocks you can use to make your standard work.

In addition to using these building blocks you can modify them. If you feel that there are parts you do not like or that are not exactly what you want then your system can modify them. Your scheme requirements can specify that everything in a particular document applies to your scheme unless it is specifically changed in your requirements. If you think that 'periodic' internal audits are not enough you can require 'annual' internal audits.

The main advantage of this building block approach is that the industries, processors, traders, retailers and others are already used to many of these elements. They can readily understand them and they know the kinds of things that an auditor needs and what to expect in the process.

Finally, I always recommend that once you have your brilliant idea for a new scheme and you dive into the standard to make sure that you also start early to develop the rest of the puzzle pieces. Find the people on your team to lead these efforts and when you don't understand a new topic get some professional advice.

Yes, you are the issue expert that is working on the soul of the new scheme, the standard. To build the whole thing you will need all the puzzle pieces and they all must fit seamlessly together.

It is when you have a full and complete picture assembled that others, even those who are not expert in your field, will be able to see, understand and want to use your scheme.

Traceability

Traceability (sometimes called chain-of-custody) systems are normally used to ensure that the product sold as certified is also a product that is certified. To make sure the product sold is what you promise to the end user traceability requirements are most often designed to verify that no mixing or substitution is made from source to end user.  For each step in the chain, it is important to make sure that each company's procedures and operations work effectively.  

The key elements in most product traceability systems verify that no mixing or substitution occur. These include audit procedures that include:

• Physical or temporal segregation is used to make sure that certified and uncertified material being processed in the same operation are not substituted or mixed.
• Mass balance is calculated to verify that the output amounts are consistent with the inputs.

Physical segregation means that certified products are processed in a separate machine, processing line or facility.  This way only certified inputs go in and therefor only certified outputs come out.  Temporal segregation means that different times at a processing facility are used to process a batch of either certified or uncertified material so that at any point in time it is clear whether or not the outputs at any point are certified.

To make sure that it all works, auditors or inspectors need to see the facility in operation.  

In most cases traceability system are designed as part of a larger program to achieve social, environmental, food safety or other beneficial objectives. The main objectives are normally:

• To ensure that amount produced is equal to or greater than the amount sold and,
• To assure customers that the item they purchase is the same item produced in the beneficial manner.

There are a few ways in which traceability is maintained or monitored, these include: (Note: no single scheme uses all of these.)

• One up, one down.  This requires each participant in the value chain to have auditable records for purchases and sales of certified material.  This enable auditors to make sure that the total volume of material is accounted for coming in and going out.
• Whole chain traceability.  Increasingly schemes are beginning to employ this approach by using a central database in which all transactions of certified material are recorded on a central database. This allows auditors and scheme managers to see the entire chain of custody for a single batch of a product. This means that a fish can have a code on it which allows you to see the date on which it was caught, the boat that caught it and each sale of that fish until it landed on your plate in a restaurant.  For fully operational systems this would apply to all material in a system, not just a sample.
• Mass Balance. In these systems segregation is not necessary since the entire production of a processor is subject to a percentage based claim in which they state that X% of their product is certified but no single product is identified as fully certified.  If a processor buys 60% of its raw material as certified then it claims on all it product that the company uses 60% certified material in its production.
• Certificate swapping. This is like emissions trading - if one processor in wants to sell product as certified then it 'swaps' certificates with a processor who has purchased certified material.  The goal here is that the total sale of certified material does not exceed the amount of certified material sold globally.
• Batch verification. In some cases the verification is done by just checking a set number of batches in a processor's facility.  This does not include a system audit but looks at the operation of the facility.  Normally this approach is used for a supplementary system when the processor is already subject to a full tractability audit for another system.
• Verification audits.  In addition to the traceability rules that are audited most schemes employ some method of verification outside the audits themselves.  Some schemes use DNA testing to verify the species that  are traded to check for substitution.  Increasingly food traceability systems can used trace minerals found in food to determine where it was grown.  These verification audits are used to double check the quality and reliability of the site audits done for individual certificate holders in a long or complicated value chain.

The choice of which model to follow is normally taken based on the goals of the certification scheme, the way the industry is structured and how a positive change can be best encouraged. For example an industry where the main product is sold as a bulk commodity and processing is continuous (let's say solar power sold through a public electricity grid) the choice may be to use either a mass balance or certificate swapping approach.  When it is crucial that the final consumer receive a product produced in a particular way (let's say an organic pepper) then the choice may be between one up,one down and whole chain traceability.

While many systems rely on a certified traceability system (that is each link in the value chain is certified to maintain the chain of custody) there are other options.  Some schemes may choose to maintain traceability using periodic inspections that are mandated through licensing contracts that allow product claims or logo use.

There have been failures in most if not all traceability systems. As mentioned in other posts, certification relies on certificate holders wanting to do a good job and in the vast majority of cases this works. These systems are not immune to fraud and there have been cases where that has occurred. In all the cases that I am aware of the rate of fraud and as well as accidental mixing or substitution in well managed traceability systems is significantly lower than for the same type of product is that is not audited or inspected for traceability.  

One of the challenges to schemes that employ traceability is that a pure traceability audit does not assure much about the processor.  By a pure traceability system I mean one that only focuses on maintaining at traceable link to the primary production standard and ignores all other factors. While this is a simple approach it also has the risk that certified material might be processed by children or slaves.  We are beginning to see traceability systems evolve to capture more that just traceability with a growing focus on working conditions and environmental performance.

If your scheme is looking to employ a traceability or chain of custody system as part of your system it is important to consider both your options and the implications of those options on your objectives.

Fingers on, Hands off.

Sometimes I get the question on the role of governments in sustainability certification. Well, the truth is that governments themselves decide when they want a role in any aspect of society, the challenge is to manage their expectations with your needs.

Standards and certification are built for the needs of markets. To make sure that certification works most governments want to have their fingers on the process but to be seen as having their hands off of it.

To make sense of this contradiction it is important to note how governments themselves use standards.  In a number of areas standards and the associated audits, inspections and certifications are in fact regulations that are developed by an industry or business sector. Sometimes this is done to replace existing regulations (this is being done in transportation by having airlines and railroads manage their own safety systems based on private sector audits against a standard). Other times governments choose to adopt a standard as regulation (this means that a standard becomes mandatory even though it was not debated or passed by a legislature). Governments, for the most part, understand standards and certification to be part of their regulatory toolbox.  It is in this sense that they want have their fingers on the process.

With their fingers on the process, governments want to be seen as not interfering in the market so most governments will want to be seen as keeping their hands off market based standards that the business world creates.

There is clearly a tension here.  

When developing a new standard or certification system it is best to keep this, and other contradictions in mind.  

For governments to stay in power the economy must grow - so new systems and processes are necessary. However the creation of sustainability standards can be disruptive, causing unease to those that profit from the status quo. Disruption in the economy can mean an old industry looses to a new innovation causing empires to fall and jobs to be lost.  It can also mean that new industries rise and new jobs are created.  

Good governments help manage the process of social and economic change. However the temptation to help their supporters win (and their opponents loose) can be tempting; that could mean propping up the old order or encouraging new new players. It is important to never underestimate the scale of resistance to change, especially by those who public image is built on promoting innovation and change. As a result the default position is almost always resistance to change.

Successful sustainability standards and certification systems establish themselves as firmly non-governmental.  That means that all of their governance and decision making is done without a formal role for governments.  At the same time they actively encourage governments to participate at a technical level and welcome the opportunity to meet with policy and political folks.  This allows an open channel of communication in which governments can have input on the new scheme but are not required to actively take a position on the result.

Fingers on, Hands off.

That being said, it is important that open communication be maintained even after the new scheme has become operational.  Governments are jealous of their powers and may be gentle with you when your scheme is small, but may become more aggressive as you grow.

Thinking deeply about Data...

One of the biggest challenges for new and growing schemes is dealing with data.  Early on in your operations there is often strong pressure to save money and postpone putting resources into a robust data management system that can grow with the scheme and provide a rich source of data for use in managing the scheme and understanding the impact your scheme is having.

Before thinking about how to start, let's look at the uses for the data.

For certification schemes there are two clear, high priorities for collecting data:

1. Gathering data to be used in the ongoing management of the scheme.  This includes the operation of the business and the performance of your organization (i.e. financial management, numbers of certificates, results of audits, etc...) and all other related organizations that deliver your service (i.e. certification bodies, accreditation bodies, registered consultants, registered auditors, etc...).
2. Gathering data to be used to understand the impact your scheme is having.  That is, how much, if any, is your scheme producing the changes that your scheme is seeking to make. This is to answer the question: "Is the environment or society better off because of your scheme?"

To address the first point, data is crucial to managing your scheme. Imagine trying to manage your scheme with no financial information, you would have no way of knowing whether or not you can make payroll each month or pay your bills.  Business management requires data. Business managers often speak about KPIs (Key Performance Indicators). These are the key bits that a manager needs to know in order to determine if the organization is achieving its operational goals.  

For business management the sequence of what can be done with raw data looks something like this:

Data - Information - Knowledge - Insight

Data is the raw set of numbers or other points that are gathered.  As you process that data you can produce information.  Using the information you can begin to ask questions, explore what is happening and gain knowledge about your operations.  From that knowledge you can gain insight that you can then use in making operational, tactical and strategic decisions about how to be more successful. For more information on this take a look at ISO 14031, Environmental Performance Evaluation - Guidelines (there are also loads of business books on KPIs).  In this area it is important to never confuse raw data with knowledge or especially with insight.

For the process of understanding the impact of your scheme the process looks something like:

Outputs - Outcomes - Impacts

Outputs are the basic statistics about your program (i.e. how many audits were conducted, how many people attended training seminars, how many products are certified, etc...).  Outcomes are the second or third order changes that may result from the outputs (i.e. how many people who took your training shared that information with other groups, how many companies sought certification because someone else got certified, etc...).  Impacts are the changes that you want your scheme to achieve (i.e. the water is less polluted, are more girls are going to school, is farm income rising, etc...).  For more information on this look at ISEAL Alliance's Impacts Code. The full progression is important because while you may be achieving high levels of outputs these are not necessarily a guarantee that you are ultimately having your desired impacts.

In  brief, you can run your scheme with limited data only for a short while.  Eventually you are going to need robust and reliable data that you can use as a basis for making decisions. One day you will get to the point that you need the data, at this point it is too late to start collecting it. Data collection is crucial and must be started before the board, CEO or a new strategy consultant asks for it.

The big challenge in starting the collection of reliable data is knowing what to collect.  To design a good system for collecting data it is important that you think deeply about what you are trying to do and what you are trying to achieve.  Your data collection should be focused on what you need to know about, understand and evaluate.  

My last point is to encourage you to be open to the possibility that what you learn from the data you collect may challenge some (or even all) of the fundamentals of your scheme.  You may be extremely successful in getting companies or products certified, that does not mean however that you are automatically achieving your desired impacts.  Use the data to understand, and if necessary, change how you and your partner organizations do your work. 

No matter where you are in the process of managing your scheme, but especially when you are just starting out, it is important to start early and to think deeply about data.

A note on connection with colleagues...

This past week I had the chance to attend my first ISEAL Conference, this one was held in London.  The ISEAL Alliance www.isealalliance.org is the leading international organization for sustainability standards, certification, accreditation and labeling. They are based in London and have staff in a number of different countries.

This may seem a little off topic but work in the field of social, environmental or other sustainability standards and certification can be isolating. As many of you may have noticed, certification is not a normal topic of conversation and finding colleagues who work in this area can be a bit hard.  If you are working on a certification scheme (on standards, certification, accreditation, labeling, etc...) it is really helpful to find folks that you can talk to. 

In organizations that run schemes that I have worked with there are a number of different specialties of the staff.  Some are marketers, others are branding experts, some are the issue experts (these are the folks that are experts in the subject area of the scheme) and then there are the people that work on the nuts and bolts of how audits are conducted.  

No matter which area you are in it is important to be able to connect with people who are working in a similar field.  How one scheme solves a problem can inform how you can solve yours - even if the solution had to deal with calculating a living wage in a wide range of countries and you have to figure out how to deal with sustainable harvest levels across numerous ecoregions. Sometimes solutions are out there and it is so much easier to adapt a solution that works than to create a new one from scratch. 

Our common goal is to make the world more just and sustainable --- and we can do that together so much more easily than working in isolation.

Market Transformation

Way back in the mists of time, standards were developed to ensure that technical issues could be resolved.  The goal was to make sure that measures were the same at the buyer's and seller's end, that screw threads or that railroad gauges were the same.  

The role of standards began a major transformation with the development of 'management system standards'.  These standards did not set specific requirements for the product but were designed to ensure that each product (or service) was consistent and of the same quality.  With this approach the role of standards began a transformation.  Now when I purchase a ton of widgets not only can I expect that a ton is a ton but I can expect that each of the widgets is of a consistent quality.

With the development of social and environmental standards the role of standards has seen another change, now standards can tell us about process and production methodologies - that is - how a product was made or how a specific material was sourced.  This can include things like whether or not pesticides were used, if raw materials were sourced sustainably or if workers were paid a living wage.  

Most social and environmental standards and certification schemes have been developed to change how a market functions so that buyers and final users expect and demand products that are socially and or environmentally responsible.  If certification schemes are successful they can create demand that producers have to respond to, whether or not they are certified.  At some point, with sufficient demand an entire market can change so that the vast majority of products are produced in a way that seeks to satisfy the new market demand.  This establishes a 'new normal' in the market in which this more responsible performance is expected and it becomes difficult for those not meeting this new level of performance to succeed. 

Market transformation occurs when this 'new normal' is established.  It does not mean that all products sold fully conform to a certain scheme, but it does mean that there has been a fundamental change which disadvantages those that do not change.

The path to successful market transformation is not straightforward or easy.  Setbacks are many and conflict with those that resist change will arise.  The bigger the market transformation that is sought the greater the challenge.  

Fundamentally if a goal of your scheme is to transform a market then it is important to understand the market and the value chain from primary production to final use (and maybe to reuse) even if your scheme only focuses on one part of the process.  For example if your scheme seeks to ensure that farm workers are paid a living wage and treated with dignity, your scheme will likely just set certification requirement for the farm.  The market transformation will occur when the value chain adopts your position and demands justice for farm workers.  This means that decisions made off the farm, by brokers, processors, retailers, restaurants and consumers have adopted the 'new normal' so that just about every farm worker can feel a change in the market by the change in their daily lives.

Certification...why even bother?

Some economists tell us that price is the only signal that is needed in the market. This signal indicates when supply is high or low relative to demand. The need for only a price signal in the market may have been the case when Adam Smith was writing in the late 1700s when purchasers most likely knew the person selling a product, how it was made and where it came from.  For us living in a global economy most of this information is not readily available.

We want or need to know about a product in order to make a choice. In addition to price we need to know about quality, materials, the source of materials, where a product is made, the conditions under which it is made and a host of other bits of information.

We have standardized many elements from voltage for electronics to thread size of bolts, each of these need to be identified and confirmed when, for example we need to make sure that your bolts fit the other parts on my machine; or when we need to know the grade of wood (i.e. how many knots and of what size to expect) for the wood we want to buy without having to travel to the sawmill to inspect each shipment.

As global supply chains grow and as market demand reflects changes in values about the products we buy, certification schemes have been created that provide information about the sourcing of raw materials, resource extraction, the impacts of processing, as well as the working conditions in mines, forests, fisheries and factories. Certification schemes can enable purchasers, either processors in the supply chain, retailers or consumers to make purchasing decisions on a host of product characteristics.  

Effective certification schemes are the ones that fill an information need in the global supply chain and better enable sellers and buyers to match up their needs with the products and services available.

Certification schemes that are successful in providing clear and useful information about the characteristics of products, services as well as process and production methods will be most successful and will be best placed to support and encourage markets to prefer environmentally and socially beneficial purchasing decisions.